Royal Mail dispute is a harbinger of things to come

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The UK government looks set to reap the consequences of its own stupidity in the shape of a new winter of discontent. This is because the Communications Workers Union ballot, which resulted in an 89 percent vote for industrial action on a turnout of a staggering 73 percent of the union membership (making strikes likely in the weeks leading up to Christmas) demonstrates that Tory anti-union legislation can be beaten. Behind the CWU are a host of public sector workers with similar grievances, each of who will now take heart from the result.

This was not supposed to happen. The Trade Union Act 2016 was designed to prevent unions from taking lawful industrial action. The 2016 Act requires unions to secure a majority vote in which those voting for action are at least 40 percent of eligible voters in a paper ballot (the government pointedly refused electronic voting which might lead to a higher turnout).

Many Tories must now regret not setting these hurdles for last year’s Brexit referendum. And that’s the problem, of course. Because while the 2016 Act made (official) strikes much harder to call, it makes them all the harder to settle when a union manages to secure this kind of result. So, as with Brexit, those opposing industrial action are obliged to appeal to some version of economic “common sense” to discourage Royal Mail workers from running headlong into destroying their own jobs.

One such appeal comes from Matthew Vincent at the Financial Times who argues that industrial action can only result in Royal Mail customers going to even less scrupulous employers:

“Given the competition now provided by gig economy groups, analysts warn that customers can easily transfer their business to rivals — threatening more Royal Mail jobs. Nor is this an imagined or politicised threat. All of Royal Mail’s current rivals were created in response to 1970s and 80s strikes: Whistl (formerly TNT Post UK), Yodel (formerly Home Delivery Network), Hermes, and UK Mail.

“While many of these adopt a self-employment model with minimal benefits, Royal Mail points out that it pays staff £23,000 after just one year — more than junior teachers or nurses receive — and has 63 per cent of its workers in a defined benefit pension compared with 6 per cent in the private sector nationally. That is to say nothing of the £500m it paid in national insurance — which gig employers avoid — to fund state pensions.”

The assumption here is that Royal Mail workers will not have thought about this (in the same way as Leave voters are supposed to have not thought about the consequences of leaving the EU). But according to the union general secretary:

“The CWU have tapped into a mood amongst workers in across the UK. Our members are prepared to stand up and fight to protect their terms and conditions and we will do everything within our means to defend them.”

This is what happens when a government imposes eight years of austerity cuts (with no end in sight) on ordinary working people while failing to address the financial crisis that austerity cuts were supposed to solve. It is no accident that the CWU dispute is not about wages, but rather, Royal Mail plans to renege on pension obligations (something, incidentally, that the CWU has been forced to do to its own staff). As Vincent notes:

“Royal Mail argues that the old scheme is unaffordable, because its annual contributions would have to rise from £400m normally to £1bn next year, and it does not have the free cash flow to fund that. In fact, even the CWU’s own staff pension schemes are facing a scaling back of benefits, as their costs have spiralled, leaving them in deficit. Earlier this year, a CWU document admitted that its schemes were ‘no longer sustainable’.”

If this sounds like Déjà vu, it is because it is exactly the same crisis that caused the UK government to raise the retirement age for younger workers. It is the same crisis that brought pantomime villain Phillip Green before the Work and Pensions select committee. It is the same crisis that almost destroyed what remains of the UK steel industry. It is also the crisis that is coming to take your retirement savings away – assuming you are not so young or poor that you will be obliged to go on working until you drop.

Listen to the government and their tame Westminster Village journalists and you might come away believing that the pensions crisis is solely the result of our aging population – it is our fault for living so long! In reality, the current crisis is a direct consequence of successive governments’ choices to crush the people in order to save the banks. As Oscar Williams-Grut at Business Insider was warning more than a year ago:

“The UK has run up a national pension deficit of more than £400 billion ($518 billion) over the past decade, becoming the biggest liability to the economy… 84.4% of UK pension schemes are now in deficit.”

The reason for this is a toxic combination of low interest rates, quantitative easing, anaemic economic growth and Tory attempts to cut government borrowing (which is where most private pension funds are invested). Quite simply, the pension promises that were made decades ago when interest rates were in double figures cannot be honoured by an industry that has experienced nine years of below-inflation interest rates just as the baby boomer generation has reached retirement age.

As Williams-Grut explains, the only solution on the table that prevent the pensions industry collapsing entirely are:

“1. Retirees take a “haircut” — essentially getting a pension of less than they were promised;

“2. The government and corporations borrow more to cover the pension shortfall, pushing up national debt levels;

“3. Companies try and buy-out members of these schemes with so-called ‘plasma TV deals’ that ultimately leave retirees worse off;

“4. Interest rates finally rise, making investment return target more manageable. But after the first rate cut in 8 years to a new record low, that doesn’t look likely.”

This brings us back to the current CWU/Royal Mail dispute, which puts both the company and the workforce in an impossible situation. Because of the sums of money needed to make up the pension deficit, Royal Mail may be unable to come up with a deal that is acceptable to the union. However, without such a deal, the pension scheme may collapse entirely. The negotiators on both sides probably understand this, but they are now severely hampered by the stupidity of the Trade Union Act 2016, which has dealt the workforce such a strong negotiating hand that nothing short of a Royal Mail climb down will be acceptable.

Nor will matters end with this dispute. Workers across Britain are now waking up to the fact that their pension schemes are collapsing, even as the government is forcing them to wait longer to retire. Their incomes are stagnating, their standard of living is falling, their public services are faltering. Meanwhile their governing party is so caught up in its own self-inflicted Brexit crisis that it seems oblivious to the growing storm; still less be able to offer any sensible solutions.